Every 28 seconds another student loan borrower defaults on their loan, underscoring how student loan debt is wreaking havoc on borrowers who are having a difficult time paying these large loans back. Whether they are federal or private student loans, the number of defaults highlight the difficulties student borrowers are facing. Currently, there is 1.5 million in outstanding student loan debt in the U.S. with student loans representing more than a third of severe derogatory balances.
Federally Guaranteed Student Loan Debt
Some trace the problem back to policies that nationalized student debt lending that some say made it way too easy to borrow, driving tuition up to a point where the average graduate has roughly 40k in debt when it is all said and done. Straddling a generation with unaffordable debt with educations that are not translating into good jobs has many thinking it’s time to return to privatizing student loans and more responsible lending.
Private Student Loan Debt
However, many will tell you that there are problems inherent in both systems when it comes to the plight of borrowers. For one thing, private loans often require borrowers to enter into forced arbitration provisions (federal loans do not) that stop borrowers from going to court. This insulates student lenders and for profit colleges from liability for misconduct such as predatory lending and widespread illegal cheating of borrowers. Although legislation barring student loan contracts from containing forced arbitration clauses with class action bans have been introduced, as it stands today, a growing number of students including vets are falling victim to deceptive claims made by for profit colleges with their hands tied. Unfortunately, many are sitting on a pile of student loan debt with a worthless degree.
Until private student loan lenders and for profit colleges are prohibited from what some lawmakers characterize as “biased, secretive, and lawless” behavior, federally backed loans are probably here to stay as are high tuition costs. Those considering taking out loans, whether they be federal or private, should be thoughtful when considering what “bang they are getting for their buck” by carefully researching the higher learning institution they plan to attend. The devil is in the details when signing a loan contract, so pay close attention and try to take as few loans as you are able – all in an effort to avoid financial problems post-graduation when many are just getting started with their lives.
Bankruptcy Protection as a Strategy for Getting Out of Student Loan Debt
Sometimes people in a difficult financial situation may consider bankruptcy protection. While some debts such as student loans or tax debt are generally not dischargeable in a chapter 7 bankruptcy, some who are experiencing financial difficulty are able to get relief from unsecured debt or medical bills making it possible to meet those obligations. If you would like more information to decide if bankruptcy protection is a good strategy for getting out of student loans, contact Peoria Illinois bankruptcy lawyer Charles E. Covey at 309-674-8125.